2017 (8) TMI 493 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - pending winding up petition - Held that - Taking into consideration the order passed by the Hon ble High Court of Delhi as well as the Notification issued by the Central Government and as extracted above it is clear that the provisions of Companies Act, 1956 will govern in relation to the proceedings pending before the Hon ble High Court of Delhi and not the Companies Act, 2013 as contended by the counsel for the applicant. If that be so, no suit or other legal proceeding shall be proceeded with, against the company, except by leave of the Court which is seized of the winding up proceedings. In the present instance no leave has been obtained by the applicant to proceed with present proceedings initiated by the applicant company before this Tribunal and obviously this Tribunal is therefore handicapped in proceeding further in relation to the above company petition. It is to be borne in mind that both winding up proceedings under the erstwhile Companies Act of 1956 as well as the Insolvency Resolution Process is initiated for the benefit of the general body of creditors and is a representative action and not for the recovery of money of the individual creditor for which necessarily claims are required to be submitted to the Official Liquidator or the Interim Resolution Professional as the case may be. In the instant case in view of the matter pending before the Hon ble High Court of Delhi which has also thought it fit to appoint the Official Liquidator as the Provisional Liquidator of the respondent company, the Interim Resolution Professional, if appointed will again be put on a collusive course with the Official Liquidator even in accepting the claims as may be filed as envisaged under section 21 of IBC. Taking into consideration the above aspects and legal position we are not inclined to accept the submissions put forth by the Counsel for the Applicant and we are constrained to reject the application. Before parting we make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of controversy as we have refrained from entertaining the application at the initial stage itself. Therefore the right of the applicants before any other forum shall not be prejudiced on account of dismissal of instant application.

Summary

Issues:
1. Application under section 9 of the Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process initiation.
2. Dispute over payment default by the respondent company and service agreement breach.
3. Appointment of Official Liquidator by the Hon'ble High Court for winding up proceedings.
4. Interpretation of the Companies Act, 2013 and Companies Act, 1956 in relation to the pending proceedings.
5. Conflict between the Insolvency Resolution Process and winding up proceedings.
6. Rejection of the application and its implications on the rights of the applicants.

Analysis:

1. The Applicant Company sought initiation of Corporate Insolvency Resolution Process against the respondent company under section 9 of the Insolvency and Bankruptcy Code, 2016 due to default in payment of dues amounting to &8377; 1,93,37,105 as per the service agreement for IT-related services provided by the applicant.

2. The applicant issued notices of demand under the IBC rules, which were returned unserved, indicating the respondent's failure to pay the outstanding amount. The applicant contended that the circumstances warranted the initiation of insolvency proceedings against the respondent company to recover the unpaid dues.

3. The Hon'ble High Court of Delhi had appointed the Official Liquidator as the Provisional Liquidator for winding up proceedings against the respondent company. The Tribunal highlighted the transfer of proceedings under section 434 of the Companies Act, 2013, and the implications of the recent changes brought about by the Central Government.

4. The Tribunal examined the Notification issued by the Central Government regarding the transfer of winding up proceedings and emphasized that the Companies Act, 1956 would govern the pending proceedings before the Hon'ble High Court of Delhi, not the Companies Act, 2013, as argued by the applicant's counsel.

5. Considering the potential conflict between the Insolvency Resolution Process and the winding up proceedings, the Tribunal reasoned that proceeding with the application would lead to overlapping actions by the Interim Resolution Professional and the Official Liquidator, both working for the benefit of creditors. The Tribunal concluded that accepting the application would create a collusive course of action and rejected the application.

6. The Tribunal clarified that the rejection of the application did not reflect an opinion on the underlying merits of the dispute and ensured that the dismissal would not prejudice the rights of the applicants to seek recourse in other forums. The decision was made to avoid conflicting actions and to uphold the integrity of the insolvency and winding up processes.